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Market update – Friday 19 June 2020

As we receive news that the United Kingdom’s chief medical officers have agreed that the COVID-19 threat level should be lowered one notch to ‘epidemic is in general circulation’ from ‘transmission is high or rising exponentially’, I have provided a round-up below of financial news for you.

London shares rose on Friday as a sharp rebound in retail sales in May bolstered hopes of a swift economic recovery from the pandemic-driven slump, while energy shares tracked a gain as oil prices rose on a pledge by OPEC and allies to meet their supply cut commitments.

The FTSE 100 was up 0.5% and on course to rise for the fourth week in five as optimism continued around the revival in business activity.

Data today showed retail sales volumes surged by a record 12% in May amid an easing in the nationwide shutdown imposed to contain the spread of the novel coronavirus. This confirmed that British shoppers bought much more than expected in May as the country gradually relaxed its coronavirus lockdown and online retailers boomed, adding to signs that the economy is moving away from its historic crash in March and April.

But official data also showed public borrowing hit a record high as the government opened the spending taps and public debt passed 100% of economic output.

The Bank of England on Thursday expanded its bond-buying plan, as expected, but slowed the pace of the programme, saying it saw some signs of an economic recovery. A separate survey on Friday showed consumer sentiment recorded its biggest improvement in nearly four years in June. The Bank of England (BoE) Governor Andrew Bailey said that the economy appeared to be shrinking a bit less severely in the first half of 2020 than the BoE had feared. But there was no guarantee of a strong rebound and unemployment would rise.

European shares rose with a focus on EU recovery fund talks which are high on the agenda at the European Council meeting today.

Wall Street was also set to open higher on Friday with the tech-heavy Nasdaq inching closer to a fresh record high on hopes of a bounce back in post-pandemic economic activity, as investors shrugged off rising new COVID-19 cases in several U.S. states.

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update – Friday 5 June 2020

As the lockdown rules continue to evolve, we wanted to get in touch to provide you with some updates which, as well as our usual market commentary include information we thought would interest you on Absolute and investment matters.

Working with Absolute Financial Management

The safety of our clients and staff is our biggest priority, both from a physical and digital perspective.

We are closely following government guidance the quarantine and as you are already aware, we temporarily closed our offices at the end of March to protect our team, after putting into place our contingency office closure plan and ensuring we were all set up to be able to work at home effectively and securely. These arrangements have enabled us to remain fully engaged with our clients, team members and the service providers we use for your investments while protecting your data to the highest standards which comply with General Data Protection Regulation.

Mark and Spencer have been busy, at a distance, preparing the offices in our multiple locations for when we are able to return from our remote working arrangements. A full deep clean of premises has been carried out to the highest standard and regular, thorough surface cleansing will continue to be of utmost importance. COVID-19 risk assessments have been completed, which have led to several implementations which include amongst other things changes to the lay-out of each office, phased return of staff to office and emphasis on technology to reduce post and ensure we can communicate with you in a way that suits you best as we move into a new era.

We plan to begin the phased return of staff on Monday 6 July as long as guidance permits.

Exciting technological developments

We are focused upon working more efficiently and sustainably using technology.

Please be assured that regardless of any new technology we put into place, we will continue to work with you in the way that you feel most comfortable and are here for you.

New capabilities within our back office system will allow us to engage better with you; this includes, amongst many other things, a very simple secure messaging service and the ability for you to view your overall financial position in one place; a wealth dashboard if you will. You can expect future information on this shortly; we are working behind the scenes on putting it into place.

With offices temporarily shut around the country (ours and investment service providers we use), the need to reduce physical contact of any sort with you and our paperless office goals, we have reduced the post we send to you using technology. As well as the use of email, we have recently introduced DocuSign for paperwork, and electronic risk profiling as part of our exciting developments.

We are committed to assisting you in using any technology we use, to better enable us to work effectively with you while keeping a distance. If you should find anything difficult to use we are able to provide coaching and full support but of course we will continue to use more traditional methods of staying in contact as well.

Investing for positive change

Absolute is an avid supporter of investing in a sustainable way. That includes embedding sustainability practices into our own business and lifestyles.

This topic has come even more to the forefront given recent calls to action including not only social, environmental and financial issues highlighted by the coronavirus (decrease in demand for oil, cut of dividends, future demand issues with air travel decline and home working) but also the many fires experienced in Australia recently, the increasingly extreme weather globally, the plastics damaging our oceans. We are not alone in our belief that big changes to the world have been already set in motion and will continue to be seen in the immediate future due to these events.

One way we can make a contribution is to use positive change or sustainable investment strategies which have undergone our stringent due diligence and which we thoroughly endorse. These provide an extremely compelling investment solution designed to deliver strong returns while benefitting society through identifying long-term transformative developments, such as technological and medical advances and investing in companies that have a positive impact on society and the environment and can make for attractive and sustainable investments, using investments that are less prone to external shocks associated with such problems as obesity, pollution and environmental damage, and I will be very happy to provide you with more information on some options. These companies are solving society’s challenges and we believe these companies of the future will prosper over the long term, due to rising demand for their products and services, motivated employees and loyal customers; they are helping to build a more stable, resilient and prosperous economy.

The strategies we recommend have all performed extremely well compared to traditional solutions within their peer groups investing within their comparable risk profile.  This situation has been shown to be the case in a rising market, as well as during the recent market falls. We believe sustainable business practices offer resilience in a crisis and they have certainly demonstrated this.

Consider use of tax allowances now rather than later!

As we know, the cost of Covid-19 to our economy is already vast and needs to be paid for somehow.

With this in mind we urge you to take advantage of allowances such as ISA and pension annual allowances (including any carry forward annual allowance you may be able to use) now if you are able to.

In future reliefs and allowances are expected to be less generous or even cease to exist.

Some POSSIBILITIES which we could help you plan for now include:

Income tax

  • Increase to tax rates
  • Reduction or removal of personal allowance
  • Decrease to the level at which the personal allowance starts to be restricted below current level of £100,000

 Pensions

  •  Reduction of higher and additional rate relief on individual pension contributions
  • Merge of pension and ISA regimes into ONE single savings regime with a flat rate of tax (25%?)
  • Removal of the triple lock on the annual increase to state pensions

Please get in touch with us now so that we can do our job in helping you maximise your assets for your future.

Market news

Yesterday, the European Central Bank (ECB) increased both the size and duration of the Pandemic quantitative easing programme, but markets initially took a pause for breath before continuing their rally today. This programme will provide a structural support to European debt markets for several years.

We also heard yesterday that the US may deliver another $1tn fiscal stimulus package which would only intensify the level of liquidity supporting financial markets at the moment. Due to the timing of Congress’s two-week recess this is very unlikely to come together until the start of July, but the prospect of further fiscal stimulus provides a pillar of support for the economy and the market rally.

US Trade Representative Robert Lighthizer took a constructive tone when discussing the Phase One trade deal between the US and China. He cited the purchase of more than $100m of soybeans by China as evidence that the Chinese were holding up their end of the deal. These comments stand in stark contrast to the recent escalation in words by the White House and helps support the market narrative that electoral politics are supporting the tougher words rather than a desire by the Trump administration to tear up January’s deal. Lighthizer also commented that he did not favour the US pulling out of the WTO; another more conciliatory message.

The huge rally we have seen in risk assets over the last fortnight deserved a breather and this is what yesterday’s pause amounts to. The ECB largely delivered on what the market wanted and this will help liquidity in financial assets as well as provide some confidence that the ECB is not looking to exit the programme in the near term.

As always, please do get in touch if you wish to discuss any aspect of your financial plan, or any of the above news.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update – Friday 22 May 2020

I wanted to get in touch with you now we have moved into the next phase of the battle against coronavirus. We have seen positive data this week showing that mortalities from Covid-19 are reducing across the globe and lockdowns easing in many countries.

Much news has been released this week and there have been some economic positives which I have rounded up below.

Earlier in the week markets saw a strong surge as Moderna’s early stage vaccination trial success boosted sentiment. Risk sentiment was also buoyed by tentative signs of European solidarity as France and Germany committed to an EU Recovery Fund.

Given how well the market took the news that Remdesevir may help against the symptoms of COVID-19, movements towards a vaccine were likely to lead to substantial gains. Not only is this a positive for the specific vaccine that Moderna is working on but also suggests that COVID-19 will be a virus that can be vaccinated against. This is relief for policymakers as many virus’s cannot be contained by vaccination. Moderna’s progress helps to reduce one of the big market risks, that future waves of COVID-19 would periodically shut down parts of the global economy. Markets will be watching progress towards a vaccine, and timelines for eventual manufacture.

The European Commission revealed it will outline a bold recovery plan to tackle the consequences of the pandemic, which could exceed €1trn in the form of grants and loans to hard hit regions.

The plans for the EU’s ‘recovery  instrument’, which are expected to be unveiled next Wednesday (27 May), are to be closely linked to the EU’s budget plans and is likely to include the creation of a recovery and resilience facility, which will concentrate on investments and structural reforms.

The initial proposal from France and  Germany signalled a step change in  the eurozone’s attitude to sharing debt, by providing grants to harder hit regions, such as Italy and Spain, and these proposals pushed government bond yields from southern European countries lower, and the euro higher.

Over in the US, there are hopes that the jobs market has now bottomed after US initial jobless claims came in as expected and that the bulk of jobs to be lost have already been lost.  The US manufacturing PMI also showed some mild improvement as did the European and UK numbers.

Investment focus: Volatility 

Ups and downs are a natural part of investing but when the graphs get spiky, most of us get caught in the headlights. We know good investing is about being able to stay composed no matter what is happening but that takes a rational mind.

Why volatility hurts

We are generally able to recognise in ourselves two main emotional responses to market movements: worry, as a market rises; and panic, as it falls. Speed these gyrations up and even the most placid of us can start to feel uneasy.

Research into this has concluded that we experience the pain of a loss twice as much as the joy of a gain, so the distress we feel at the thought of the former means we’re only human.

However, the best investors neither celebrate nor commiserate too much or for too long. Instead, they understand that volatility is the price we pay for the long-term outperformance of equities over cash. Keeping that long-term view at the front of your mind should help you look at short-term fluctuations as nothing more than mere blips on a much longer journey.

“Uncertainty is actually the friend of the buyer of long-term values.”  – Warren Buffett

Adequately diversifying your portfolio with a range of assets is a basic principle of long-term investing. Absolute truly believe in the benefits of diversification and have ensured the investment strategy we have recommended to you uses this principle.

Bull and Bear Markets

This table shows the highs and lows of UK bull and bear markets from the 1920s to the present day and puts this period of uncertainty into perspective:

Source: Money Observer May 2020/Timelineapp Tech 

Bull or Bear Start Date End Date Depth Duration
Bull Jan-26 Oct-29 47% 3yr 10 months
Bear Nov-29 Jul-32 -45% 2yr 9 months
Bull Aug-32 Jan-37 142% 4yr 6 months
Bear Feb-37 Aug-40 -42% 3yr 7 months
Bull Sep-40 Nov-51 341% 11yr 3 months
Bear Dec-51 Jul-52 -22% 8 months
Bull Aug-52 Aug-57 160% 5yr 1 month
Bear Sep-57 Mar-58 -20% 7 months
Bull Apr-58 May-61 168% 3yr 2 months
Bear Jun-61 Aug-62 -21% 1yr 3 months
Bull Sep-62 Feb-69 185% 6yr 6 months
Bear Mar-69 Jun-70 -30% 1yr 4 months
Bull Jul-70 May-72 103% 1yr 11 months
Bear Jun-72 Dec-74 -67% 2yr 7 months
Bull Jan-75 Oct-87 3514% 12yr 10 months
Bear Nov-87 Dec-87 -34% 2 months
Bull Jan-88 Sep-00 571% 12yr 9 months
Bear Oct-00 Feb-03 -43% 2yr 5 months
Bull Mar-03 Nov-07 135% 4yr 9 months
Bear Dec-07 Mar-09 -41% 1yr 4 months
Bull Apr-09 Dec-19 212% 10yr 9 months
  • Average bull duration 7 years
  • Average bull ‘height’ 507.1%
  • Average bear duration: 1 year and 8 months
  • Average bear ‘depth’ -36.5%

As previous, our message remains the same……sit tight and await the recovery, it will come.

Finally, please copy the below text into your browser to hear the latest thoughts from Tatton Investment Manager, Lothar Mentel, which I thought may be of interest.

https://www.tattoninvestments.com/tatton-media/market-update

We hope you are well and as always, if you wish to discuss any aspect of your investments then do not hesitate to get in touch.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

 

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Market update – Friday 17 April 2020

I hope this finds you well and safe at home (for another 3 weeks at best).

This week we have seen a wide range of information released and while some of it has been rather bleak, there has also been many positives which have caused markets to continue their rally. World stock markets made a sprint towards a second straight week of gains today after President Donald Trump laid out plans to gradually reopen the coronavirus-hit U.S. economy following similar moves elsewhere and news of reports that patients with severe COVID-19 symptoms had responded positively to a drug made by U.S. company Gilead Sciences.

Economic and corporate data was always going to be very poor and therefore the reaction by markets to confirmations of this fact are more to do with the general mood of the market than the data itself. The best example of this is the initial jobless claims report which has been the blockbuster data set when it comes to the impact of the virus and one that was released yesterday. We have seen over 16 million people file for support in the last three weeks, however on each of the days we have seen the jobless figures released the US market has rallied by at least 2% with one day over 6%. As a result, we firmly believe that the duration of the lockdowns is the primary focus of the market rather than data, be it corporate or economic. New case growth and governmental progress towards exit strategies will dominate the medium-term trend for equities.

The world continues to closely watch China, and also now the experiences of those European countries entering into the first phases of exit from lockdown.

China’s first quarter GDP was every bit as bad as investors expected but the March activity in the world’s second-biggest economy gives some cause for optimism.

What we have seen in China may give us some indication as to what could be experienced in other parts of the world where we see effective containment strategies, curves flattening and economic activity returning. We have also seen globally strong levels of government and central bank intervention, particularly in the US and Europe and these may help to support growth over the medium term.

Since the first quarter ended, China has seen a strong recovery, both in consumption and fixed asset related activities. There was an announcement that schools would reopen, and we have seen the lifting of restrictions on people being able to leave Wuhan. More broadly we saw 90 per cent of people return to work by the second week of April, and 90 per cent of construction activity restarting, especially in the context of infrastructure related projects.

China’s worst quarterly contraction in decades was largely in line with low expectations: overall GDP slumped 6.8 per cent year-on-year in the first three months and was down about 10 per cent from the previous quarter. What really matters now is the pace of recovery following its lockdowns, which will serve as a bellwether for the rest of the world.

While households still seemed to be struggling in March, we see rather good news in the Chinese corporate and industrial sectors. State-owned enterprises are driving a rebound in investment activity, real estate is picking up, and manufacturers are quickly recovering with the outbreak now under control. Across the board, we are seeing signs that this is an economy very much emerging from the phase of economic activity being heavily restricted, as it dealt with the containment of the virus, and starting now to move into more normal activity patterns. The best news came in industrial production numbers, where the fabled ‘V-shaped’ recovery seems to be materialising. March saw an unprecedented 32 per cent month-on-month bounce, taking output to within a whisker of 2019 levels after a horrific start to the year.

We shall continue to keep you updated, we are operating efficiently from our home bases and our message is still very much ‘sit tight and wait for the recovery’. As always, if you wish to get in touch to discuss any aspects of your investment portfolio, please do not hesitate to contact me. It is a new tax year with new pension and ISA allowances, and I believe there are some very good reasons to invest now should you have the capacity.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update – Wednesday 1 April 2020

As news reaches us today that the UK lockdown may have already begun to slow the spread of COVID-19, I wanted to get in touch to share our current views with you. Despite the market movements so far today, there have been a number of positive news stories released this week and I thought it would be beneficial to share some of these.

Markets finally received what they wanted from US lawmakers at the beginning of the week. The House of Representatives passed the $2trn package providing direct fiscal support to citizens and businesses impacted by the economic fallout from coronavirus. This was taken positively by markets though a lot of the good news was already in the price after the strong rally we saw last week. The theme of the last fortnight has been increasingly dramatic intervention by governments and central banks globally. Our expectation is that this will now take a pause for the short term and markets therefore will take their tone from two factors: estimates over the expected duration of the coronavirus lockdowns and economic data that hints at how much activity has stopped. That said, there are already rumours of a new US $600bn fiscal package being agreed between the White House and Democratic Congressmen and should this come to fruition it is likely to boost sentiment further. The bill is expected to include more state aid as well as specific assistance for the mortgage market and travel industries. This shows the political will to add to the current stimulus in order to cover gaps in previous policy or to address emerging risks in certain sectors of the economy – this reassurance may be more powerful than the stimulus itself.

We expect to see extensive weakness in economic data sets as they are released over the coming weeks. The US initial jobless claims showed how dramatically the brakes have been put on in some sectors of the economy. This is unlikely to be unique so expect many headlines announcing the ‘worst reading since data collection began’. The more positive aspect is that this is what the markets are expecting and a good deal of this is already in the price. The main question is how long this will continue. Expectations are for the brunt of the slowdown to occur in Q1 and Q2 of 2020 however should this extend market sentiment could turn negative again. This is why new case growth slowing, and any success in antibody testing, is so critical for near term optimism.

The major news from yesterday was the Chinese Purchase Manufacturing Index surveys, which point to a rebound in economic activity post the lifting of the lockdown in the country. The manufacturing and the services measures both moved above 50 implying an improvement in conditions. Clearly this needs to be taken with a slight pinch of salt as the global slowdown that is expected from coronavirus will undoubtedly impact both supply and demand in China. However, the latest figures will start to add weight to the argument that we will see a V shaped recovery in the Western world once the lockdowns are concluded, particularly if fiscal stimulus provides a significant boost to activity in the interim.

Given increased efforts to contain the spread of the coronavirus, we anticipate a sharp (but we hope short) contraction in the world’s biggest economy, the US economy, which has likely already entered into recession this month.

We expect, however, that this could also turn out to be among the shortest recessions in history. Importantly, we assume that the need to significantly restrain activity, such as the closure of non-essential businesses, will dissipate by late in the second quarter. Under such a scenario, and with aggressive fiscal and monetary policy measures, we would foresee a rebound in growth in the third quarter to mark the end of this sharp yet short recession.

Next Monday, 6 April, sees the start of the new 2020/21 tax year and this brings with it opportunities for investing fresh money into the markets, using available allowances such as ISA and pension contributions.  Given that the price of most equities has become much lower than it had been, investing now means that equities have more room to grow before they reach what analysts assess as their fair value. Markets have rebounded somewhat from their lows on 23 March, however, are still down significantly from the start of the year, for example, the FTSE All Share index is still down over 26% since January, representing a potentially good time to invest.  If you would like to discuss this in more detail, please do get in touch with me.

Please click on the below link to view a chart which I recently received from Vanguard, whose investment strategies we regularly recommend, entitled ‘Bull and Bear Markets’. This chart shows market cycles since 1900 and helps to demonstrate the value of staying the course.  It shows that bear markets, which is where markets fall more than 20%, have historically always been short in duration and followed by a longer period of growth. While we have never experienced such restrictions to movement and a subsequent drop in demand, markets have experienced sudden shocks before as demonstrated in the graph, and we can draw on this experience.

https://www.vanguard.co.uk/documents/adv/literature/bear-and-bull-chart_uk_en_pro.pdf

The months ahead will be trying times for all of us, as consumers, investors and people contending with the virus. But we have faith that there are better days ahead and would urge you to continue to take a long-term investment view. Investing for the long term gives your money the greatest chance of growing in value. But this means holding your nerve during periods of significant stock market volatility – and remembering that, as history shows, markets will recover.

If you wish to speak to your financial adviser directly about any aspect of your portfolio, you will find their contact details on the About us page. We have accounts in place with Zoom and as such are able to carry out face-to-face discussions with you using this technology, in place of physical meetings.  Our contingency arrangements across our offices are now in place, but please be assured we are working hard to deliver the best outcomes for you, keep you updated and guide you through this unsettling period.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

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Market update Wednesday 25 March 2020

Since my last update on Friday, we have seen the introduction of the near full lockdown in the UK on Monday. Yesterday markets across the globe rallied, and as I write today European and American markets are mostly all up after news that Congress and the Trump administration had agreed a $2 trillion fiscal stimulus package.  Sterling also strengthened and the dollar weakened on this news.  Further government action continues to have the intended effect by providing support to the global economy.

Lothar Mentel, who’s views on the markets and global economy I have forwarded to you previously, released his latest update yesterday, and I thought you may be interested to hear this.

Why have stock markets appeared to rally on the lock-down?

Yesterday the UK followed much of Europe and the US into a painful lock-down of its people and economy, yet today stock markets rally 5-6% by early afternoon – how can these go together?

In this investment update, we discuss how governments’ fiscal support measures for the economy and the central banks’ monetary commitment to provide sufficient capital for bond markets mean capital markets no longer seem to assume a lasting collapse of the global economy. We then explain why central banks’ actions are both suitable and effective to prevent collateral damage from the COVID-19 restrictions driving the global financial systems towards another financial crisis.

Please paste the below into your browser to watch:

https://www.tattoninvestments.com/tatton-media/market-update

If you wish to speak to your financial adviser directly about any aspect of your portfolio, you will find their contact details on the About us page. We have accounts in place with Zoom and as such are able to carry out face-to-face discussions with you using this technology, in place of physical meetings.  Our contingency arrangements across our offices are now in place, but please be assured we are working hard to deliver the best outcomes for you, keep you updated and guide you through this unsettling period.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

AFM No Comments

Market update – Friday 20 March 2020

Yesterday the Bank of England again stepped in to attempt to shield Britain’s economy from the coronavirus outbreak by cutting interest rates to 0.1% and also ramped up its bond-buying programme.

Late the day before the European Central Bank announced a stimulus package, also in the form of a bond buying spree.

The quantitative easing announcements helped to calm the bond markets yesterday and will directly add much needed money into these economies.

We see both of the above moves as positive news, designed to bring support and stabilisation to the financial system, along with the announcements this week from the chancellor of the support packages to be introduced for individuals and businesses across the UK.

In addition to these actions, the Federal Reserve provided support for money market funds. The Bank of Japan increased Japanese Government Bond purchases and offered further liquidity to the market. South Korea pledged more money for smaller companies. Australia cut rates and announced term funding scheme. So more government and central bank action is being pledged to counter the effects of the coronavirus.

Investors have taken the government support and policymakers actions as good news with a somewhat relief rally in markets this morning across Europe, with Asian markets also in the main having surged overnight.  Adding to the mix were oil stocks boosting the indices after Trump hinted he may intervene in the price war between Saudi Arabia and Russia.  Reuters indicates that there is little aggressive buying, but that the broad environment is perceived to be a bit better.

Away from financial news, amid the gloom of the forthcoming lockdown in movement, yesterday China provided a ray of hope, as it reported zero new local transmissions in a thumbs up for its draconian containment policies since January.

I have attached Lothar Mentel’s latest video from yesterday; as you will recall from my previous update, Lothar is a very experienced and successful investment manager providing investment strategies which we endorse.

Confusion reigns in Capital Markets

Since our last investment update video, governments and central banks around the world have acted precisely how we had suggested: They have put forward very sizeable monetary and fiscal support measures and stated repeatedly that they will and can ‘do whatever it takes’ and that there is ‘no limit’ in size as to what they may do.

In the attached video investment update I am discussing why, with the measures central banks and governments have now adopted under a quasi state‑of‑emergency wartime economic and financial regime, it is highly unlikely markets will be permitted to cause another global financial crisis. This remains a Corona health crisis that we all know will come to an end, what is unknown is the exact duration.

Please click on the link below to watch:

https://www.tattoninvestments.com/tatton-media/market-update

If you wish to speak to your financial adviser directly about any aspect of your portfolio, you will find their contact details on the About us page. We have accounts in place with Zoom and as such are able to carry out face-to-face discussions with you using this technology, in place of physical meetings.  Our contingency arrangements across our offices are now in place, but please be assured we are working hard to deliver the best outcomes for you, keep you updated and guide you through this unsettling period.

To contact us by telephone, please call:

Ashford office: 01233 646 666 

Hastings office: 01424 457 080 

Kind regards,
Mark Eaton
Director

AFM No Comments

Market update – Wednesday 18 March 2020

I would like to provide you with our current thoughts on the COVID-19 situation and share a video with you from one of the investment managers we endorse, who is very well respected as an industry specialist; Lothar Mental.  In the clip Lothar provides a general overview and his insight into the current market movements and outlook.

Global stock market movements over the last week have been unprecedented and nothing short of dramatic. The sell-off of shares around the world has been heightened by the measures governments are imposing for entire nations including the lockdown by the Italian government, the draconian measures announced by President Macron in France last night and the new tightened measures introduced by the British government. Not to mention the growing problems faced by the US and elsewhere around the world in response to the pandemic. With this backdrop, I wanted to send you our analysis of the current investment landscape and views as to how the market might behave in the short-term and why it is important to remain calm and remain invested.

Investment landscape

The continued spread of coronavirus and the wide-scale quarantining across the world has led to fear over reduced global demand and disruption of supply chains. The impact of this was compounded by disagreements last week between OPEC members, leading to the oil price falling from $60 a barrel at the start of the year to around $30 today.

Market analysis

Equity markets have fallen dramatically in response to these events and for the most part, indiscriminately. Some sectors have been hit harder than others such as energy and smaller companies which have led the sell offs, as well as those companies with complex supply chains and businesses reliant on discretionary consumer spending.

It has become clear that the impact of the virus is likely to be with us at least for the medium term and in response, consumers are likely to save rather than spend in the face of adversity and uncertainty. The concern for investors is that this develops from a health crisis to a liquidity crisis and beyond.

We all know that markets fear uncertainty and the global economic impact and the threat of recession is an unknown. However, what is becoming clearer is that we are beginning to witness a sustained and co-ordinated response from governments and central banks, such as the Bank of England and the Federal Reserve in the US with fiscal packages and a cut in interest rates. We anticipate that this over time should support markets.

Remaining calm

Whilst this current situation is undoubtedly worrying over the short term, we continue to remain committed to investing for the long-term.   We would urge caution and restraint in these volatile conditions and do not recommend any change to your investment strategy, in light of recent events.  The portfolio we have recommended for you was selected to match your assessed risk profile and for your investment time horizon and as such, we would recommend that you remain invested in accordance with this, rather than to sell out, realising losses.

If you are drawing an income from your investments, I would ask you to assess whether you could temporarily halt this, or at least reduce the amount you take, as withdrawals during a period of falling markets will compound portfolio losses.  This happens because as the value of your units in a fund decrease, a greater number of units need to be sold to produce the same level of income.  This in turn reduces the original income producing base making it more difficult for the portfolio to recover in value when the markets do and therefore to also provide the same level of income.

Please do not hesitate to call us on 01233 646666 if you wish to discuss the current situation in more detail, or your ability to lower your income payments.

Finally, please clink on the link below to view Lothar’s assessment of the situation.

From euphoric recovery to depressed tumble

Over the course of the weekend, stock markets have turned from euphoric recovery (US closed up +10% Friday night) to depressed tumble once more.

In today’s investment update we discuss what has changed and what we expect to change over the course of this week.

Central banks around the world have proven since last week that they mean it when they state that they will do whatever it takes to avoid outsized fallout from the COVID-19 activity restrictions.

Politicians have also made first moves towards mobilising fiscal policy to bridge the ‘Covid-chasm’ for small businesses and cash strapped households – they now have to follow up and get considerable fiscal accommodation under way.

Stock markets are increasingly pricing in a worst-case outcome, which by no means has to be a given, which means that stock markets are likely to continue to yo-yo up and down until things become clearer.

Please click on the below link to watch:

https://www.tattoninvestments.com/tatton-media/market-update-16-march-2020

Kind regards,
Mark Eaton
Director